1. Event Overview The company released its 2012 three-quarter report, achieving revenue of 2,884 billion yuan, a year-on-year decrease of 0.31%; net profit of 19.31 million yuan, a year-on-year increase of 113.66%; and earnings per share of 0.04 yuan. 2. Analysis and judgment The decline in revenue due to the decline in sales of refined oil products The company is an enterprise whose main business is the sale of refined oil products, and Sinopec is the largest shareholder. The company's revenue declined slightly in the first three quarters. The main reason was that due to the slump in downstream demand, the sales volume of refined oil products declined, and the price of refined oil products was controlled again, and the increase was lower than that of crude oil. The reduction in asset impairment losses led to a sharp rise in profit. In the face of a slight decline in revenue, the company's net profit increased 113% year on year, with net profit for the third quarter increasing 567% year on year. The main reason for the sharp increase in profit is that asset impairment losses fell 95% year over year, mainly because the company mainly sells refined oil products, and investment real estate impairment losses and fixed asset impairment losses declined sharply after business transformation. The price reform of refined oil products is conducive to improving the company's performance. The company's main business blocks are distributed in Tai'an, Qingdao, and Qufu in Shandong, where the Tai'an region accounts for more than 80% of the market share. We expect that a new mechanism for adjusting the price of refined oil products will be introduced next year, and that the adjustment of natural gas prices will gradually advance. The company's many years of hard work in the field of refined oil products and natural gas will pay off starting next year. 3. Profit forecasts and investment recommendations anticipate that EPS will be fully diluted in 2012-2014 to 0.06, 0.07, and 0.10, respectively. In the future, the company will vigorously expand sales terminals for refined oil and natural gas products to further increase regional market share. Considering that a series of price adjustment policies for refined oil and natural gas products will be introduced in the future, which is a major benefit for the company, we gave the company a “careful recommendation” rating. 4. Risk warning: International oil prices have risen sharply; sales of refined oil products and natural gas have been limited due to continued sluggish demand in the downstream industry; domestic oil and gas price adjustment mechanisms have not been introduced in a timely manner, causing the company to continue to lose money.